Executives
Beverly Holley – Director, IR
Craig Wheeler – President and CEO
Rick Shea – VP and CFO
Analysts
Bret Holley – Oppenheimer & Co.
Eric Schmidt – Cowen and Company
Simos Simeonidis – Rodman & Renshaw
Robyn Karnauskas – Deutsche Bank Securities
Biren Amin – FTN Equity Capital Markets Corp.
Duane Nash – Wedbush Morgan
Momenta Pharmaceuticals, Inc. (MNTA) Q3 2009 Earnings Call Transcript November 5, 2008 10:00 AM ET
Operator
Good day, ladies and gentlemen, and welcome to the Momenta Pharmaceuticals third quarter 2009 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator instructions). As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host today, Beverly Holley, Director of Investor Relations. Please begin.
Beverly Holley
Thank you, and good morning. I want to welcome all of you to Momenta’s conference call to discuss financial results for the third quarter of 2009 and provide a corporate update.
With me on the call today with prepared remarks are Craig Wheeler, President and Chief Executive Officer; and Rick Shea, Chief Financial Officer. Following our remarks, we’ll open the call to questions.
Before we begin, I’d like to mention that our call today will contain forward-looking statements. Various remarks that Momenta Pharmaceuticals may make about its results of operations, regulatory filings and review, intellectual property rights, development and manufacturing efforts, litigation, legislative developments, operating expenses, beliefs, future expectations, plans and prospects constitute forward-looking statements for the purpose of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995.
Actual results may differ materially from those stated or implied by these forward-looking statements as a result of various important factors including those discussed in the “Risk Factors” section of our quarterly report on Form 10-Q for the quarter ended September 30, 2009, as well as other documents that the Company files with the Securities and Exchange Commission from time-to-time.
In addition, any forward-looking statements represent the Company’s views only as of today, and should not be relied upon as representing its views as of any subsequent dates. While the company may elect to update forward-looking statements at some point in the future, it specifically disclaims any obligation to do so whether as a result of new information, future events or otherwise, and therefore you should not rely on these forward-looking statements as representing the Company’s views as of any date subsequent to today.
With that, I will now turn this call over to Craig Wheeler, Momenta’s President and Chief Executive Officer.
Craig Wheeler
Thank you, Beverly. Good morning, everyone, and thanks for joining us. This morning I will provide an update on recent corporate developments of Momenta, beginning with M-Enoxaparin, and then following my remarks, Rick will provide a financial overview.
The M-Enoxaparin ANDA continues to be under reviewed by the FDA, and we remain cautiously optimistic that 2009 approval is possible. Should an approval be granted, we have large supply available and we and Sandoz intend to launch as soon as possible following the FDA’s decision.
As we have discussed in previous calls, the FDA increased its scrutiny of suppliers and marketers of heparin-based products, following the global heparin contamination crisis in 2008.
In connection with the review of M-Enoxaparin, Momenta and Sandoz have been working with the agency to document and to demonstrate the test and procedures we utilize to ensure that our heparin supply chain is safe. At this point our heparin suppliers and API manufacturer have been inspected with no significant issues identified to us. However, we have not yet received the final inspection reports and the questions could be asked at any time.
Additionally new U.S. Pharmacopeia or USP monograph for heparin and for M-Enoxaparin have been developed. These monographs describe the test and protocols required for heparin and M-Enoxaparin products to meet USP standard. The monograph for heparin came into effect on October 1st and the new USP monograph for M-Enoxaparin will become effective as of December 1.
We’re very familiar with new standards. Our heparin source material meets the new heparin standards and we’re confident that M-Enoxaparin will meet the standards that are expected to be issued on December 1. We do not believe that these USP standards will be an impediment to our approval and launch.
In short, we remain confident in the approvability of M-Enoxaparin and we believe the FDA has all the major elements it needs to approve the ANDA. While we believe it is possible to receive an approval in 2009, there is no statutory timetable for an FDA decision, so the ultimate timing of the decision remains uncertain.
I’ll now discuss M356, our generic version of Teva’s Copaxone, which we are developing in collaboration with Sandoz. Our characterization technology has enabled us to create a generic version of Copaxone that we believe will meet the FDA’s requirements for interchangeability, potentially allowing us and Sandoz to launch the first generic version of this important treatment from multiple sclerosis.
I’ll briefly recap the status of this program. Sandoz submitted an ANDA in December of 2007, which was accepted for review in July of 2008. We believe the Sandoz ANDA is the first to file. The ANDA is currently under review at the FDA and we are actively engaged with the agency in that review.
It is also subject of a lawsuit brought by Teva against Sandoz and Momenta regarding Teva’s Copaxone patent claims. The 30-month stay triggered by this suit expires in the first quarter of 2011. I won’t comment on the active litigation, but we are pleased with the pace at which this case is moving. The current schedule, which may change, calls for a Markman hearing in December.
At the Markman hearing, the court construes the scope of the patent claims. They will be an indication of each party’s position in the litigation and in some cases can provide an opportunity for summary judgment. We are confident in the strength of our case and look forward to further progress. Interested parties can access information concerning the case from the Court’s PACER system or Public Access to Court Electronic Records.
I’ll now turn to our most advanced novel product M118. M118 is a rationally engineered anticoagulant targeted specifically to patients with acute coronary syndrome. In June, we announced positive top line results from our first Phase II trial, the EMINENCE study, noting that the study achieved its primary endpoint. In September, the full results for EMINENCE study were represented at the 21st Annual Transcatheter Cardiovascular Therapeutics Conference in San Francisco.
We are very pleased with the EMINENCE results. We support our belief that M118 has the potential to become a baseline anticoagulant of choice for the treatment of patients with acute coronary syndromes.
We are particularly encouraged to note the reduction in clinical event in the study relative to active control, which was unfractionated heparin despite the relatively short-term administration of M118 in the catheterization lab. If you’re interested in further details of the study, please refer to our Web site where you can access the press release, the details of the key results
I’d like to point out that all elements of M118 development program including preclinical Phase I and Phase II study support our rational design hypothesis of combining the convenience of low molecular heparin with the clinical advantages of heparin.
As we’ve discussed in the past, we are actively seeking a collaboration partner to finance and support further clinical development of M118. We are continuing discussions with multiple potential partners, but do not anticipate entering into a partnership before year-end.
Before we move away from the discussion of our novel products, I will just briefly mention that we continue to conduct preclinical evaluations to support our future IND submission for our oncology product candidate M402.
I’ll now turn to follow-on biologics. We continue to advance the development of our analytic tool set, characterize and develop our initial product candidate. We are applying these analytic capabilities to develop a deeper understanding of these biologic product structure as well as a better understanding of the cellular pathways that produce these products. We believe that ultimately this increased knowledge will allow us to design in controlled manufacturing process to make equivalent follow-on products.
Although we believe our technological expertise provides an excellent entry point into this attractive market we are still operating without a clear regulatory pathway.
We are an active participant in the FOB congressional debate and have advocated for legislation that gives the FDA full scientific discretion in the review process. Our provision for interchange ability and a transparent and efficient patent resolution process.
We’re pleased that pending bills contain provisions provided in the FDA with the authority and scientific discretion to approve into tangible products. We are however disappointed that the current bills contain excessive 12-year debt exclusivity provisions that will deter investments delayed by our generic competition and discourage novel drug innovation.
We also believe that the House bill in particular contains anti-competitive barriers to biogeneric entry by requiring separate generic product names and postponing patent clearance until biogeneric product approval. We are continuing to aggressively invest in this area and believe we have the necessary tools and vision to build a competitively differentiated FOB business.
Our goal remains to develop not merely biosimilar, but true generic versions of these expensive potency biologic drug, which will not only create a significant business opportunity for Momenta, but also provide patients in need with access to safe, effective and affordable biologic drugs.
The application of our technology to biologics does not stop with follow-on biologics. Our enhanced product and process knowledge opened up new insight into biology, enabling the development of both improved or bio better and novel biologic drugs. The strategy is similar to what we’ve perused with heparin starting with the development of a generic Lovenox continuing with M118 and then finally M402, which is our novel heparin-based oncology candidate.
This application of our biologics technology to novel drugs is at an earlier stage of development in our FOB program, but we remain committed to advancing our work in this area and are very excited about developing future improved novel biologic products. We view the extension of our biologics R&D ever beyond FOB as an important stepping stone to the long range vision from Momenta. We look forward to updating you as we advance this program.
I’ll now turn the call over to Rick Shea to provide a financial update.
Rick Shea
Thank you, Craig. First, let me mention that in September, we announced the closing of an underwritten public offering of 4.6 million shares of our common stock, which included the full exercise of the underwriters over allotment option of 600,000 shares. In this financing, Momenta receive its net proceeds of $46.8 million.
Moving on to the third quarter 2009 financial results, revenue for the third quarter was 4.0 million compared to 3.9 million for the same period last year. The increase in revenue was due to increased reimbursable expenditures on our programs partnered with Sandoz.
Research and development expenses for the third quarter were $12.9 million compared to $14.1 million for the same period in 2008. The 8% decrease in R&D expenses principally resulted from decreased clinical development related manufacturing costs for M118 program, due to the completion of the EMINENCE study in June 2009.
General and administrative expenses of third quarter totaled $5.6 million compared with $6.3 million for the same period last year. The 10% decrease in G&A expenses was primarily due to decreased professional fees.
Resulting net loss for the third quarter was $14.6 million or a loss of $0.38 per share. That compared to a net loss of $16.0 million or a loss of $0.45 per share for the second quarter 2008.
Overall, the decrease in the net loss was the result of lower operating expenses partly offset by lower interest income. We ended the third quarter 2009 with $107.3 million in cash and marketable securities compared with $72.1 million at the end of the second quarter and $108.5 million at the end of 2008.
Cash burn for the third quarter 2009 was $11.6 million and year-to-date cash burn was $48 million. We are projecting full year cash burn excluding any potential M-Enoxaparin launch revenue or any potential new collaboration revenues to be approximately $58 million, which is slightly higher than our previous projection of $55 million.
This concludes my financial review. We’ll now open the call for questions.
Question-and-Answer Session
Operator
(Operator instructions). Our first question comes from Bret Holley.
Bret Holley – Oppenheimer & Co.
Yes. Thanks for taking the questions. I’m wondering just kind of the 30,000 level, if you think the pending healthcare reform legislation adequately addresses the difference in biogenerics and biosimilars. It seems like there is often a completion of these concepts in the legislation in my mind?
Craig Wheeler
Yes, Bret, thanks. I think you're correct. There still continues to be confusion among the use for the works of biogeneric and biosimilars etc., I think the thing that really gives us confidence that we can adequately address that is that it does give the ability to the FDA to actually make substitutable decisions. And so, while the Nomenclature continues to be confused I think in various different bills and conversations, the statutes that we see being developed there are very clear at least at this point that the FDA has the discretion to actually allow for the approval of substitutable drug.
Bret Holley – Oppenheimer & Co.
Okay. So basically just the interchangeability is kind of left to the discretion of the FDA, you’re confident that based on their scientific understanding, they can adequately make a decision essentially for the legislators?
Craig Wheeler
Yes. We do believe that is the intent and that will happen that way
Bret Holley – Oppenheimer & Co.
Okay. And then the other question I have was what the potential time line following the Markman hearing will be in the generic Copaxone litigation, just I guess theoretically what next steps would be?
Craig Wheeler
Well, I think it’s really hard to speculate because a lot of that depends upon how narrow the scope of the claims are, that are defined. Of course, we’re going to a trial phase after that and a lot can happen around the Markman hearing. I mean you would expect that it should be able to be completed with the timeline so advance for the Markman hearing within the stay before 2011. So I would estimate that we would be able to be done before them, but speculating on a specific timeline probably doesn’t make sense.
Bret Holley – Oppenheimer & Co.
Fair enough. Thanks for taking the questions.
Craig Wheeler
Sure. Thanks.
Operator
Our next question comes from Eric Schmidt. Please state your question.
Eric Schmidt – Cowen & Co.
Good morning. Craig, just a further probe little bit on your comments about the USP standards changing for Enoxaparin on December 1. Do I interpret what you said to me that you could in fact be approved even before the December 1 change?
Craig Wheeler
Well, I can’t speculate exactly when we’re going to be approved from the FDA. We think that they have all the major elements that they need to approve the drug and it really is up to them in terms of when they do it. Could it happen before? I’m sure is possible, but I don’t want to speculate on that, but we’re hopeful as soon as possible they get it done.
Eric Schmidt – Cowen & Co.
I mean, the standard themselves you don’t think that change on December 1st prevents the FDA from acting before that change?
Craig Wheeler
I don’t believe so. I think all of the leads that we have in terms of USP and what we’ve been doing is even preparing for that. So we are ready both complying with the old standards as well as the new standards when they come into effect. And USP’s will change standards from time-to-time on drugs that are on the market as well. So you do have to meet it when it actually comes out. And I think once as long it is ready it shouldn’t impede approval.
Eric Schmidt – Cowen & Co.
Okay. Can you provide us with any kind of insight on how much launch supply you have, is it by 5% of the market, 20%, 50% should you be approved?
Craig Wheeler
Yes, we have not and don’t intend to give specific guidance on the launch supply that we have ready. I guess the way to say it is that as I’ve said in the past that we’re trying to titrate making sure we have launch supply ready with the risk of approval, because we don’t want to have a lot of expired material out there. And this is very much like you do with any new drug. But we do have the supply chain built, we do have inventory that we built and are prepared for launch and then depending upon how that market evolve we’ll continue to manage our supply chain appropriately to be able to meet the demand.
Eric Schmidt – Cowen & Co.
And question for, Rick, on the R&D spending. It came down fairly substantially in Q3. You mentioned the M118 study having concluded. Is there any reason it will go back upward over the next quarter or two?
Rick Shea
Well, certainly our R&D spending can fluctuate from quarter-to-quarter based on things like manufacturing activities, particularly related to some of the M356 development. So that can be quarterly for fluctuations. I think the general trend is probably going to be consistent.
Eric Schmidt – Cowen & Co.
Probably in kind of a lowered level of general spending without M118 being a factor?
Rick Shea
Slightly lower, yes.
Eric Schmidt – Cowen & Co.
Okay. Thank you.
Operator
Our next question comes from Simos Simeonidis.
Simos Simeonidis – Rodman & Renshaw
Good morning, guys. Thanks for taking my question. Craig, you said that you’re cautiously optimistic that you can see an approval this year. I want to drove – does that come from the fact that you believe you’ve answered all the questions the FDA agency has opposed and you’re just now waiting or am I correct to assume that’s where you’re getting that from?
Craig Wheeler
Well, I think it’s fair to say that we believe that we have given them all the major pieces of information that they need to approve it. And the other thing I think it’s fair to say that we’re in act of back and forth dialog with the agency when I think that gives us confidence that they are actively working and trying to review and get this application completed. It’s very typical, I do want to comment, it’s very typical, it’s that you’re in conversations with the agency on issues right up until the day of approval.
But the important thing for us is we’ve submitted all the major elements they need and we are in active dialog and they are in act to produce. So that leads me to believe that it is possible. I think that has to continue to give the caveat. I don’t think they’re operating to a specific calendar date and there is no PDUFA date here. So, it really is up to the values of the FDA when it actually happened.
Simos Simeonidis – Rodman & Renshaw
Great. And then you said that you will be close to launching – let’s say you’re approved to close launching, we just say, it’s a matter of weeks of few months that happened?
Craig Wheeler
I think beyond saying that we have launched supply and intend to launch as soon as possible after the FDA approval. I don’t want to go further than that at this point, but suffice to say we are being aggressive in terms of trying to get ready to get this product into the marketplace.
Operator
Our next question comes from Robyn Karnauskas.
Robyn Karnauskas – Deutsche Bank
Hi guys. Thanks for taking my question. I apologize, I missed the first couple of minutes of the call so if you’ve answered this. So Cabot mentioned on their call the other day that they are actually in labeling discussions with the FDA. I was wondering if you’ve had similar type discussions in your conversation.
Craig Wheeler
Well, first to point out that this is a generic drug. And so the labels really are dictated by what the brand labels are. I would assume that they may be talking about the changes that labeled – what’s coming out in USP and inherent USP, but that is very common as you’re going to go through an application. So, I really can’t comment beyond that and what exactly they mean by labeling discussion.
Robyn Karnauskas – Deutsche Bank
Okay. That’s helpful. And I guess then, there has been a lot of talk regarding the USP standards about having to do follow-up studies and monitor how those standards are affecting you? Certainly done that for heparin and now they may do that for a Lovenox. Who bears the burden of monitoring these types of effects in the marketplace when you change USP standard?
Craig Wheeler
I’m not quite sure what your question when you say monitoring the results of changes.
Robyn Karnauskas – Deutsche Bank
Right. They’re going to basically monitor like how this might affect to use in the real world, like dosing and so forth. And I guess there's three tier plan on how they’re going to monitor in a real world dose? And how patients are responding to the drug if there is any complications?
Craig Wheeler
Yes. I think if they were long-term required, I think that would be led by the innovator and generics would of course comply what it is ever necessary for the innovator drug, that’s why you have to do the generic. But I think it really would be the innovator that would actually have to initiate what happening there due to the generics file suit.
Robyn Karnauskas – Deutsche Bank
Okay. That’s helpful. And then I guess my next question would be, so upon generic approval, there is royalty rates range you’ve given out. How soon do you think we get a sense of what that actual royalty rate would be? And also could you remind us of any milestones that are associated with approval?
Craig Wheeler
Yes, let me just comment on the royalty rate and then I’ll let Rick comment on any milestones in it. But I think on the royalty rate, we're hesitant to actually give specific guidance at this point in terms of how the finances work, because there is many different scenarios that could happen out there. And I think we will give more clarity in terms of how the finances work once we know what kind of situation we’re dealing with competitors etc., but I’ll let Rick comment on the milestones.
Rick Shea
With respect to the milestones in our 2003 agreement with Sandoz, there was a total of $55 million in milestones. We have not disclosed and we are not at liberty to disclose what those milestones relate to, what would trigger them, how much would be triggered by any individual milestone.
Robyn Karnauskas – Deutsche Bank
Okay. And I guess my last question was can you give us an update on partnership discussion for M118?
Craig Wheeler
Well, I would say we are in discussions with multiple parties and exploring various different options for that drug. And we’re not going to have it done by the end of the year, I would say its constructive discussions, but things are not moving as aggressively as we would have initially hoped. But I think we’ll find out how we’re going in the next two months.
Robyn Karnauskas – Deutsche Bank
Great. Thanks a lot.
Operator
Our next question comes from Biren Amin.
Biren Amin – FTN Equity Capital Markets Corp.
Yes. Thanks for taking my question. A couple of questions around M-Enoxaparin. You mentioned, you’ve got launch supply available, how much of a shelf life do you have on that launch by?
Craig Wheeler
I’m sorry, just checking to make sure I have the right answer. Its two years on the syringe.
Biren Amin – FTN Equity Capital Markets Corp.
Okay. And with regards to the manufacturing inspections, I believe you mentioned Chinese facilities have been inspected as well as Australian and New Jersey facility has been inspected and has there been any question that the FDA has raised from those inspections?
Craig Wheeler
So those inspections we’ve comment on that we have been clean on the 483, but we haven’t talked to any specifically that any dialogue that we’ve with the FDA about those inspections, but from our perspective everything is looking good.
Biren Amin – FTN Equity Capital Markets Corp.
All right. And I guess a last question on M-Enox. The data on immunogenicity was similar last year, what sort of dialogue have you had with agency since been submitted?
Craig Wheeler
Well, I think it’s fair to say we’ve had extensive dialogues with the agency about that application. And of course knowing when everything is done on the application really doesn’t come until they actually approve the application, but we’re feeling very good about where we are.
Biren Amin – FTN Equity Capital Markets Corp.
And, okay. And on Copaxone, the Markman hearing, has there been a specific date has been set December?
Craig Wheeler
I will just check in it. Sometime in the first two weeks, I’m not sure if there is a specific date, yes but there is a target for the date.
Biren Amin – FTN Equity Capital Markets Corp.
And what sort of issues will arise around the construction claims?
Craig Wheeler
We’re not commenting specifically on it, but I would refer you to take a look at the PACER system, because there are documents on that, that would help understand that.
Biren Amin – FTN Equity Capital Markets Corp.
Great. Thanks.
Operator
(Operator instructions). Our next question comes from Duane Nash.
Duane Nash – Wedbush Morgan
Great, yes, good morning and thanks for taking the question. So, first a quick question about M-Enoxaparin meeting the new USP standard. I don’t remember your precise wording, but is it certain that it meets the new standard or is there any uncertainty in that? Whether it does or not?
Craig Wheeler
I guess, I can say we are confident that we will meet the standard, because the standard is not issued yet, but the standard will be issued in the beginning of December. So we have what that standard will look like, we’re prepared for that. But until they actually issue the form of standard, I have to put a little bit of caveat around it, but right now everything looks good.
Duane Nash – Wedbush Morgan
Okay. And is it sort of a black and white scientific issue as to whether one meets the standard or is there discretion and uncertainty involved?
Craig Wheeler
It’s pretty black and white, it’s the analytic tests on various different sorts on the final product and so they’re pretty clear.
Duane Nash – Wedbush Morgan
And then one last question. Before the financing I believe you guys gave guidance that cash runway would last into 2011 even in the absence of near-term M-Enoxaparin approval. Do you have any update in light of the recent financing?
Rick Shea
Well, with the financing we’re going to end the year roughly between $95 million and $100 million in cash, so based on our historical cash burn rate that gives us roughly in the 18 months to 24 months of cash range prospectively from the end of the year.
Duane Nash – Wedbush Morgan
Great. Thanks very much.
Craig Wheeler
Sure. Thanks.
Operator
(Operator instructions). I have a follow-up from Biren Amin.
Biren Amin – FTN Equity Capital Markets Corp.
A quick question on the USP monograph change. With regards to heparin, I believe that the potency was about 10% lower with the new standards compared to the former standards. So will the potency be affected with the new USP standards for Lovenox?
Craig Wheeler
No, it shouldn’t be.
Biren Amin – FTN Equity Capital Markets Corp.
Okay. Thanks.
Operator
I’m not showing any other questions at this time.
Craig Wheeler
All right. Well, thank you all for joining us on the call and we look forward to updating you on our progress in the coming months. So thank you and goodbye.
Operator
Thank you. Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the conference. You may now disconnect. Good day.
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